Strategies for leveraging IP in a hotly competitive marketplace

Companies are realizing the value of their Intellectual Property (patents) that cover technology from the chip to the printed circuit board, to the electronic system (or “systems”), to the product. This includes defending from non-practicing entities focused on licensing IP through to the latest high profile cases involving Nokia in defending its decades-long legacy in phone technology by enforcing its patents against the “upstart,” Apple. Not incidentally, Apple has not been naïve, and has been busy building its patent portfolio in this area through a combination of acquiring innovative companies (i.e., touch screen and microprocessor design companies) and in-house innovation.

STRATEGIES FOR LEVERAGING IP IN A HOTLY COMPETITIVE MARKETPLACE

Even with the high profile of this and similar cases, most systems technology companies underutilize patents as a means to support the business strategy. Now before we go much further, I should define what I mean by a system. Briefly defined, a system is a collection of chips, packaging, communications protocols and software. Patents on systems can occur anywhere in the technology, and can either be obvious (such as touch screen gestures) or hard to see (such as a communication protocol).

The trend in systems litigation has been on the dramatic upswing, having over doubled between 2006 and 2009. This trend was happening before the downturn, so it is not simply in response to companies searching for new revenue streams in the face of falling demand. Additionally, intellectual property clients are telling us that they are busier than ever despite a rapid rebound in electronics revenues. They realize that an effective patent strategy and/or enforcement program will contribute to the bottom line and increase market share for companies or business units.

                      Cross-sectional sample of 14 of the largest electronics companies

Building, managing, and enforcing a strong patent portfolio that supports the corporate business strategy is good business and can result in a lucrative revenue stream.

Before developing an enforcement program, IP professionals should carefully consider their strategy, how much time they have, what evidence may be required, and their budget. These factors will aid in maximizing a portfolio’s value, while controlling the cost of enforcement.

• Strategy – identify the desired end result of the patent enforcement program, and ensure it relates to the company’s overall business strategy by generating significant licensing revenue, or by protecting market share.

• Time – no one is waiting to willingly pay for an allegation of patent infringement and most will ignore a payment demand, hoping it goes away. Expect to be required to prove every point, and expect delays at every possible point in the process. Patent licensing discussions can last two to three years and litigations, when decisions are appealed, can last much longer. 

• Evidence – infringement analysis will determine if there is a legitimate patent infringement claim, and detailed technical analysis is required to determine if a device or technology in fact infringes. Detailed claim charts show the use of every element of the invention.

• Budget – infringement analysis by third party specialists requires a sufficient investment of time and money to be effective. Fact-based evidence, generated through reverse engineering, is a necessity for companies seeking to make effective use of their IP in patent negotiations and litigations, and as a revenue-generating asset.

Whether the business is a pure IP play or following an offensive or defensive strategy to protect (or increase) market share, a portfolio of good patents is necessary to defend against a thicket of players. This is made even more so as the lines are blurred between technologies that historically have lived in silos, such as personal computers and mobile phones.

The evidence is showing that the volume and value of deals are rising and, therefore, a strategy and disciplined approach to collecting evidence helps ensure the maximum value can be derived from corporate IP.

Julia Elvidge is President of Ottawa-based Chipworks, a leader in reverse engineering and patent infringement analysis of semiconductors and electronic systems.

Click here for more Canadian Electronics blogs, including by the patent authority Alex Anishchenko B.A.Sc. (Elec. Eng.), MBA, J.D., an associate lawyer with Bereskin & Parr.